TOYOTA MOTOR SALES v. TABARI - Ninth Circuit Court of Appeals

FOR PUBLICATION

UNITED STATES COURT OF APPEALSFOR THE NINTH CIRCUIT

TOYOTA MOTOR SALES, U.S.A.,INC., a California corporation,

Plaintiff-counter-defendant-Appellee, No. 07-55344

v. D.C. No. CV-03-08506-DSFFARZAD TABARI; LISA TABARI,California residents, d/b/a FAST OPINIONIMPORTS,

Defendants-counter-claimantsAppellants.

Appeal from the United States District Courtfor the Central District of California

Dale S. Fischer, District Judge, Presiding

Argued and SubmittedJuly 8, 2009—Pasadena, California

Filed July 8, 2010

Before: Alex Kozinski, Chief Judge, Ferdinand F. Fernandezand N. Randy Smith, Circuit Judges.

Opinion by Chief Judge Kozinski,;Concurrence by Judge Fernandez

9699

COUNSEL

Jens B. Koepke (argued), Robin Meadow, Greines, Martin,Stein & Richland LLP, Los Angeles, California; Alan S. Coo-per, Howrey, LLP, Washington, DC, for the plaintiff, counter-defendant, appellee.

9702 TOYOTA MOTOR SALES v. TABARI

Lisa Tabari (argued), Farzad Tabari, pro se, Mission Viejo,California, for the defendants, counter-claimants, appellants.

OPINION

KOZINSKI, Chief Judge:

In this trademark infringement case, we consider the appli-cation of the nominative fair use doctrine to internet domainnames.

Facts

Farzad and Lisa Tabari are auto brokers—the personalshoppers of the automotive world. They contact authorizeddealers, solicit bids and arrange for customers to buy from thedealer offering the best combination of location, availabilityand price. Consumers like this service, as it increases compe-tition among dealers, resulting in greater selection at lowerprices. For many of the same reasons, auto manufacturers anddealers aren’t so keen on it, as it undermines dealers’ territo-rial exclusivity and lowers profit margins. Until recently, theTabaris offered this service at buy-a-lexus.com and buyorlea-selexus.com.

Toyota Motor Sales U.S.A. (“Toyota”) is the exclusive dis-tributor of Lexus vehicles in the United States, and jealousguardian of the Lexus mark. A Toyota marketing executivetestified at trial that Toyota spends over $250 million everyyear promoting the Lexus brand. In the executive’s estima-tion, “Lexus is a very prestigious luxury brand and it is anindication of an exclusive luxury experience.” No doubt true.

Toyota objected to the Tabaris’ use on their website ofcopyrighted photography of Lexus vehicles and the circular“L Symbol Design mark.” Toyota also took umbrage at the

9703TOYOTA MOTOR SALES v. TABARI

Tabaris’ use of the string “lexus” in their domain names,which it believed was “likely to cause confusion as to thesource of [the Tabaris’] web site.” The Tabaris removedToyota’s photography and logo from their site and added adisclaimer in large font at the top. But they refused to give uptheir domain names. Toyota sued, and the district court foundinfringement after a bench trial. It ordered the Tabaris tocease using their domain names and enjoined them from usingthe Lexus mark in any other domain name. Pro se as theywere at trial, the Tabaris appeal.

Nominative Fair Use

When customers purchase a Lexus through the Tabaris,they receive a genuine Lexus car sold by an authorized Lexusdealer, and a portion of the proceeds ends up in Toyota’s bankaccount. Toyota doesn’t claim the business of brokeringLexus cars is illegal or that it has contracted with its dealersto prohibit selling through a broker. Instead, Toyota is usingthis trademark lawsuit to make it more difficult for consumersto use the Tabaris to buy a Lexus.

The district court applied the eight-factor test for likelihoodof confusion articulated in AMF Inc. v. Sleekcraft Boats, 599F.2d 341, 348-49 (9th Cir. 1979), and found that the Tabaris’domain names—buy-a-lexus.com and buyorleaselexus.com—infringed the Lexus trademark. But we’ve held that the Sleek-craft analysis doesn’t apply where a defendant uses the markto refer to the trademarked good itself. See Playboy Enters.,Inc. v. Welles, 279 F.3d 796, 801 (9th Cir. 2002); New Kidson the Block v. News Am. Publ’g, Inc., 971 F.2d 302, 308 (9thCir. 1992).1 The Tabaris are using the term Lexus to describe

1This is no less true where, as here, “the defendant’s ultimate goal is todescribe his own product.” Cairns v. Franklin Mint Co., 292 F.3d 1139,1151 (9th Cir. 2002) (emphasis omitted). In Welles, for instance, weapplied our nominative fair use analysis to a former playmate’s use of thePlayboy mark to describe herself and her website. 279 F.3d at 801. Weobserved that, in those circumstances, “application of the Sleekcraft test,which focuses on the similarity of the mark used by the plaintiff and thedefendant, would lead to the incorrect conclusion that virtually all nomina-tive uses are confusing.” Id.


their business of brokering Lexus automobiles; when they sayLexus, they mean Lexus. We’ve long held that such use of thetrademark is a fair use, namely nominative fair use. And fairuse is, by definition, not infringement. The Tabaris did in factpresent a nominative fair use defense to the district court.

[1] In cases where a nominative fair use defense is raised,we ask whether (1) the product was “readily identifiable”without use of the mark; (2) defendant used more of the markthan necessary; or (3) defendant falsely suggested he wassponsored or endorsed by the trademark holder. Welles, 279F.3d at 801 (quoting New Kids, 971 F.2d at 308-09). This test“evaluates the likelihood of confusion in nominative usecases.” Id. It’s designed to address the risk that nominativeuse of the mark will inspire a mistaken belief on the part ofconsumers that the speaker is sponsored or endorsed by thetrademark holder. The third factor speaks directly to the riskof such confusion, and the others do so indirectly: Consumersmay reasonably infer sponsorship or endorsement if a com-pany uses an unnecessary trademark or “more” of a mark thannecessary. But if the nominative use satisfies the three-factorNew Kids test, it doesn’t infringe. If the nominative use doesnot satisfy all the New Kids factors, the district court mayorder defendants to modify their use of the mark so that allthree factors are satisfied; it may not enjoin nominative use ofthe mark altogether.2

[2] A. The district court enjoined the Tabaris from using“any . . . domain name, service mark, trademark, trade name,meta tag or other commercial indication of origin thatincludes the mark LEXUS.” A trademark injunction, particu-larly one involving nominative fair use, can raise serious FirstAmendment concerns because it can interfere with truthfulcommunication between buyers and sellers in the market-

2If defendants are unable or unwilling to modify their use of the markto comply with New Kids, then the district court’s order to modify mayeffectively enjoin defendants from using the mark at all.


place. See Va. State Bd. of Pharmacy v. Va. Citizens Con-sumer Council, Inc., 425 U.S. 748, 763-64 (1976).Accordingly, “we must [e]nsure that [the injunction] is tai-lored to eliminate only the specific harm alleged.” E. & J.Gallo Winery v. Gallo Cattle Co., 967 F.2d 1280, 1297 (9thCir. 1992). To uphold the broad injunction entered in thiscase, we would have to be convinced that consumers arelikely to believe a site is sponsored or endorsed by a trade-mark holder whenever the domain name contains the string ofletters that make up the trademark.

In performing this analysis, our focus must be on the “ ‘rea-sonably prudent consumer’ in the marketplace.” Cf. Dream-werks Prod. Group, Inc. v. SKG Studio, 142 F.3d 1127, 1129(9th Cir. 1998) (describing the test for likelihood of confusionin analogous Sleekcraft context). The relevant marketplace isthe online marketplace, and the relevant consumer is a reason-ably prudent consumer accustomed to shopping online; thekind of consumer who is likely to visit the Tabaris’ websitewhen shopping for an expensive product like a luxury car.See, e.g., Interstellar Starship Servs., Ltd. v. Epix, Inc., 304F.3d 936, 946 (9th Cir. 2002). Unreasonable, imprudent andinexperienced web-shoppers are not relevant.

[3] The injunction here is plainly overbroad—as evenToyota’s counsel grudgingly conceded at oral argument—because it prohibits domain names that on their face dispelany confusion as to sponsorship or endorsement. The Tabarisare prohibited from doing business at sites like independent-lexus-broker.com and we-are-definitely-not-lexus.com,although a reasonable consumer wouldn’t believe Toyotasponsors the websites using those domains. Prohibition ofsuch truthful and non-misleading speech does not advance theLanham Act’s purpose of protecting consumers and prevent-ing unfair competition; in fact, it undermines that rationale byfrustrating honest communication between the Tabaris andtheir customers.


Even if we were to modify the injunction to excludedomain names that expressly disclaim sponsorship orendorsement (like the examples above), the injunction wouldstill be too broad. The Tabaris may not do business at lexus-broker.com, even though that’s the most straightforward,obvious and truthful way to describe their business. The nom-inative fair use doctrine allows such truthful use of a mark,even if the speaker fails to expressly disavow association withthe trademark holder, so long as it’s unlikely to cause confu-sion as to sponsorship or endorsement. See Welles, 279 F.3dat 803 n.26. In New Kids, for instance, we found that use ofthe “New Kids on the Block” mark in a newspaper survey didnot infringe, even absent a disclaimer, because the survey said“nothing that expressly or by fair implication connotesendorsement or joint sponsorship.” 971 F.2d at 309. Speakersare under no obligation to provide a disclaimer as a conditionfor engaging in truthful, non-misleading speech.

Although our opinion in Volkswagenwerk Aktiengesell-schaft v. Church remarked on that defendant’s “prominent useof the word ‘Independent’ whenever the terms ‘Volkswagen’or ‘VW’ appeared in his advertising,” 411 F.2d 350, 352 (9thCir. 1969), it isn’t to the contrary. The inclusion of suchwords will usually negate any hint of sponsorship or endorse-ment, which is why we mentioned them in concluding thatthere was no infringement in Volkswagenwerk. Id. But thatdoesn’t mean such words are required, and Volkswagenwerkdoesn’t say they are. Our subsequent cases make clear they’renot. See Welles, 279 F.3d at 803 n.26; New Kids, 971 F.2d at309.3

3The Sixth Circuit enjoined a domain name in part because it did “notinclude words like ‘independent’ or ‘unaffiliated,’ ” but in that case therewere additional factors indicating sponsorship or endorsement, includingthe use of stylized versions of the plaintiff’s marks on the site. PACCARInc. v. TeleScan Techs., L.L.C., 319 F.3d 243, 256-57 (6th Cir. 2003).Where these or other factors suggest that nominative use is likely to causeconfusion, a disclaimer may well be necessary. But a disclaimer is notrequired every time a URL contains a mark.


[4] The district court reasoned that the fact that an internetdomain contains a trademark will “generally” suggest spon-sorship or endorsement by the trademark holder. When adomain name consists only of the trademark followed by.com, or some other suffix like .org or .net, it will typicallysuggest sponsorship or endorsement by the trademark holder.Cf. Panavision Int’l, L.P. v. Toeppen, 141 F.3d 1316, 1327(9th Cir. 1998).4 This is because “[a] customer who is unsureabout a company’s domain name will often guess that thedomain name is also the company’s name.” Id. (quotingCardservice Int’l v. McGee, 950 F. Supp. 737, 741 (E.D. Va.1997)) (internal quotation marks omitted); see also BrookfieldCommc’ns, Inc. v. W. Coast Entm’t Corp., 174 F.3d 1036,1045 (9th Cir. 1999). If customers type in trademark.com andfind the site occupied by someone other than the trademarkholder, they may well believe it is the trademark holder,despite contrary evidence on the website itself. Alternatively,they may become discouraged and give up looking for thetrademark holder’s official site, believing perhaps that such awebsite doesn’t exist. Panavision, 141 F.3d at 1327.

4Of course, not every trademark.com domain name is likely to causeconsumer confusion. See Interstellar Starship, 304 F.3d at 944-46. Forinstance, we observed in Interstellar Starship that an apple orchard couldoperate at the website apple.com without risking confusion with AppleComputers, in light of the vast difference between their products. Id. at944. “If, however, the apple grower . . . competed directly with AppleComputer by selling computers, initial interest confusion probably wouldresult,” as the apple grower would be using the apple.com domain toappropriate the goodwill Apple Computer had developed in its trademark.Id.

When a website deals in goods or services related to a trademarkedbrand, as in this case, it is much closer to the second example, whereapple.com competes with Apple Computers. If a company that repairediPods, iPads and iPhones were to set up at apple.com, for instance, con-sumers would naturally assume that the company was sponsored orendorsed by Apple (or, more likely, that it was Apple). Where a site isused to sell goods or services related to the trademarked brand, a trade-mark.com domain will therefore suggest sponsorship or endorsement andwill not generally be nominative fair use.


[5] But the case where the URL consists of nothing but atrademark followed by a suffix like .com or .org is a specialone indeed. See Brookfield, 174 F.3d at 1057.5 The impor-tance ascribed to trademark.com in fact suggests that far lessconfusion will result when a domain making nominative useof a trademark includes characters in addition to those makingup the mark. Cf. Entrepreneur Media, Inc. v. Smith, 279 F.3d1135, 1146-47 (9th Cir. 2002). Because the official Lexus siteis almost certain to be found at lexus.com (as, in fact, it is),it’s far less likely to be found at other sites containing theword Lexus. On the other hand, a number of sites make nomi-native use of trademarks in their domains but are not spon-sored or endorsed by the trademark holder: You can preenabout your Mercedes at mercedesforum.com and mercedes-talk.net, read the latest about your double-skim-no-whip latteat starbucksgossip.com and find out what goodies the world’sgreatest electronics store has on sale this week at frys-electronics-ads.com. Consumers who use the internet forshopping are generally quite sophisticated about such mattersand won’t be fooled into thinking that the prestigious Germancar manufacturer sells boots at mercedesboots.com, or homesat mercedeshomes.com, or that comcastsucks.org is sponsoredor endorsed by the TV cable company just because the stringof letters making up its trademark appears in the domain.

When people go shopping online, they don’t start out bytyping random URLs containing trademarked words hoping to

5Citing our refusal to distinguish between “Golden Door,” a spa, and acompeting “Golden Door for Hair,” the district court treated buyorlea-selexus.com as legally indistinguishable from lexus.com. Golden Door,Inc. v. Odisho, 646 F.2d 347, 350 (9th Cir. 1980); see also PACCAR Inc.,319 F.3d at 252. According to Toyota, such “legally identical” phrases ina domain name can never be fair use. But there is no such rule; we lookto context to determine how much weight to give the words accompanyinga mark. See, e.g., Brother Records, Inc. v. Jardine, 318 F.3d 900, 908 (9thCir. 2003). In Golden Door, we noted that the defendant answered thephone “Golden Door,” not “Golden Door for Hair,” and featured thewords “Golden Door” prominently in its signs. 646 F.2d at 350.


get a lucky hit. They may start out by typing trademark.com,but then they’ll rely on a search engine or word of mouth.6 Ifword of mouth, confusion is unlikely because the consumerwill usually be aware of who runs the site before typing in theURL. And, if the site is located through a search engine, theconsumer will click on the link for a likely-relevant site with-out paying much attention to the URL. Use of a trademark inthe site’s domain name isn’t materially different from use inits text or metatags in this context; a search engine can finda trademark in a site regardless of where exactly it appears.In Welles, we upheld a claim that use of a mark in a site’smetatags constituted nominative fair use; we reasoned that“[s]earchers would have a much more difficult time locatingrelevant websites” if the law outlawed such truthful, non-misleading use of a mark. 279 F.3d at 804. The same logicapplies to nominative use of a mark in a domain name.

[6] Of course a domain name containing a mark cannot benominative fair use if it suggests sponsorship or endorsementby the trademark holder. We’ve already explained why trade-mark.com domains have that effect. See pp. 9707-08 supra.Sites like trademark-USA.com, trademark-of-glendale.com ore-trademark.com will also generally suggest sponsorship orendorsement by the trademark holder; the addition of “e”merely indicates the electronic version of a brand, and a loca-tion modifier following a trademark indicates that consumerscan expect to find the brand’s local subsidiary, franchise oraffiliate. See Visa Int’l Serv. Ass’n v. JSL Corp., No. 08-15206 (9th Cir. June 28, 2010). For even more obvious rea-sons, domains like official-trademark-site.com or we-are-trademark.com affirmatively suggest sponsorship or endorse-ment by the trademark holder and are not nominative fair use.7

6By “word of mouth” we, of course, refer not merely to spoken recom-mendations from friends and acquaintances, but to the whole range ofinformation available to online shoppers, including chat rooms, discussionforums, feedback and evaluation websites, and the like.

7Domain names containing trademarks may also be prohibited becausethey dilute the value of those marks—for instance, by creating negative


But the district court’s injunction is not limited to this narrowclass of cases and, indeed, the Tabaris’ domain names do notfall within it.

[7] When a domain name making nominative use of amark does not actively suggest sponsorship or endorsement,the worst that can happen is that some consumers may arriveat the site uncertain as to what they will find. But in the ageof FIOS, cable modems, DSL and T1 lines, reasonable, pru-dent and experienced internet consumers are accustomed tosuch exploration by trial and error. Cf. Interstellar Starship,304 F.3d at 946. They skip from site to site, ready to hit theback button whenever they’re not satisfied with a site’s con-tents. They fully expect to find some sites that aren’t whatthey imagine based on a glance at the domain name or searchengine summary. Outside the special case of trademark.com,or domains that actively claim affiliation with the trademarkholder, consumers don’t form any firm expectations about thesponsorship of a website until they’ve seen the landing page—if then. This is sensible agnosticism, not consumer confu-sion. See Jennifer E. Rothman, Initial Interest Confusion:Standing at the Crossroads of Trademark Law, 27 Cardozo L.Rev. 105, 122-24, 140, 158 (2005). So long as the site as awhole does not suggest sponsorship or endorsement by thetrademark holder, such momentary uncertainty does not pre-clude a finding of nominative fair use.

Toyota argues it is entitled to exclusive use of the string“lexus” in domain names because it spends hundreds of mil-

associations with the brand. Cf. Playboy Enters., Inc. v. NetscapeCommc’ns Corp., 354 F.3d 1020, 1033 (9th Cir. 2004). For example, thewebsite People of Walmart, which publishes rude photos of Walmartshoppers at peopleofwalmart.com, might dilute the Walmart trademark byassociating it with violations of customers’ privacy and the idea that a visi-tor to Walmart stores risks being photographed and ridiculed on the inter-net. See Jeffrey Zaslow, Surviving the Age of Humiliation, Wall St. J.,May 5, 2010, at D1. But Toyota does not allege that the Tabaris’ site hasany such effect.


lions of dollars every year making sure everyone recognizesand understands the word “Lexus.” But “[a] large expenditureof money does not in itself create legally protectable rights.”Smith v. Chanel, Inc., 402 F.2d 562, 568 (9th Cir. 1968); seealso Ty Inc. v. Perryman, 306 F.3d 509, 513 (7th Cir. 2002);Mark A. Lemley, The Modern Lanham Act and the Death ofCommon Sense, 108 Yale L.J. 1687, 1714-15 (1999). Indeed,it is precisely because of Toyota’s investment in the Lexusmark that “[m]uch useful social and commercial discoursewould be all but impossible if speakers were under threat ofan infringement lawsuit every time they made reference to[Lexus] by using its trademark.” New Kids, 971 F.2d at 307.8

It is the wholesale prohibition of nominative use in domainnames that would be unfair. It would be unfair to merchantsseeking to communicate the nature of the service or productoffered at their sites. And it would be unfair to consumers,who would be deprived of an increasingly important means ofreceiving such information. As noted, this would have seriousFirst Amendment implications. The only winners would becompanies like Toyota, which would acquire greater controlover the markets for goods and services related to their trade-marked brands, to the detriment of competition and consum-ers. The nominative fair use doctrine is designed to preventthis type of abuse of the rights granted by the Lanham Act.

[8] B. Toyota asserts that, even if the district court’sinjunction is overbroad, it can be upheld if limited to theTabaris’ actual domain names: buyorleaselexus.com and buy-a-lexus.com. We therefore apply the three-part New Kids testto the domain names, and we start by asking whether the

8“Words . . . do not worm their way into our discourse by accident.”Alex Kozinski, Trademarks Unplugged, 68 N.Y.U. L. Rev. 960, 975(1993). Trademark holders engage in “well-orchestrated campaignsintended to burn them into our collective consciousness.” Id. Althoughtrademark holders gain something by pushing their trademark into the lex-icon, they also inevitably lose a measure of control over their mark.


Tabaris’ use of the mark was “necessary” to describe theirbusiness. Toyota claims it was not, because the Tabaris couldhave used a domain name that did not contain the Lexusmark. It’s true they could have used some other domain namelike autobroker.com or fastimports.com, or have used the textof their website to explain their business. But it’s enough tosatisfy our test for necessity that the Tabaris needed to com-municate that they specialize in Lexus vehicles, and using theLexus mark in their domain names accomplished this goal.While using Lexus in their domain names wasn’t the onlyway to communicate the nature of their business, the samecould be said of virtually any choice the Tabaris made abouthow to convey their message: Rather than using the internet,they could publish advertisements in print; or, instead of tak-ing out print ads, they could rely on word of mouth. We’venever adopted such a draconian definition of necessity, andwe decline to do so here. In Volkswagenwerk, for instance, weaffirmed the right of a mechanic to put up a sign advertisingthat he specialized in repairing Volkswagen cars, although hecould have used a sandwich board, distributed leaflets orshouted through a megaphone. 411 F.2d at 352.9 One way orthe other, the Tabaris need to let consumers know that theyare brokers of Lexus cars, and that’s nearly impossible to dowithout mentioning Lexus, cf. Monte Carlo Shirt, Inc. v. Dae-woo Int’l (Am.) Corp., 707 F.2d 1054, 1058 (9th Cir. 1983),be it via domain name, metatag, radio jingle, telephone solici-tation or blimp.

9The Seventh Circuit has similarly upheld the right of a seller of BeanieBabies to operate at “bargainbeanies.com” on the grounds that “[y]oucan’t sell a branded product without using its brand name.” Ty Inc., 306F.3d at 512. In a prophetic choice of examples, Judge Posner remarkedthat prohibiting such a domain name “would amount to saying that if aused car dealer truthfully advertised that it sold Toyotas, or if a mufflermanufacturer truthfully advertised that it specialized in making mufflersfor installation in Toyotas, Toyota would have a claim of trademarkinfringement.” Id.


The fact that the Tabaris also broker other types of carsdoes not render their use of the Lexus mark unnecessary.10

Lisa Tabari testified: “I in my conviction and great respect forthe company always try to convince the consumer to first pur-chase a Lexus or Toyota product.” If customers decide to buysome other type of car, the Tabaris may help with that, buttheir specialty is Lexus. The Tabaris are entitled to decidewhat automotive brands to emphasize in their business, andthe district court found that the Tabaris do in fact specializein Lexus vehicles. Potential customers would naturally beinterested in that fact, and it was entirely appropriate for theTabaris to use the Lexus mark to let them know it.

Nor are we convinced by Toyota’s argument that theTabaris unnecessarily used domain names containing theLexus trademark as their trade name. See Volkswagenwerk,411 F.2d at 352. The Tabaris’ business name is not buyorlea-selexus.com or buy-a-lexus.com; it’s Fast Imports. Toyotapoints out that the Tabaris’ domain names featured promi-nently in their advertising, but that by no means proves thedomain names were synonymous with the Tabaris’ business.The Tabaris may have featured their domain names in theiradvertisements in order to tell consumers where to find theirwebsite, as well as to communicate the fact that they can helpbuy or lease a Lexus. Toyota would have to show signifi-cantly more than “prominent” advertisement to establish thecontrary. We therefore conclude that the Tabaris easily satisfythe first New Kids factor.

[9] As for the second and third steps of our nominative fairuse analysis, Toyota suggests that use of the stylized Lexus

10Toyota doesn’t suggest that the Tabaris used the Lexus mark to referto those other cars, or that the Tabaris used the Lexus mark in order toredirect customers to those cars. See, e.g., Nissan Motor Co. v. NissanComputer Corp., 378 F.3d 1002, 1019 (9th Cir. 2004). Everyone seems toconcede the Tabaris are bona fide Lexus brokers. We therefore do not con-sider whether the Tabaris used the Lexus mark in conjunction with broker-ing vehicles other than Lexus, or whether such use would be infringing.


mark and “Lexus L” logo was more use of the mark than nec-essary and suggested sponsorship or endorsement by Toyota.This is true: The Tabaris could adequately communicate theirmessage without using the visual trappings of the Lexusbrand. New Kids, 971 F.2d at 308 n.7. Moreover, those visualcues might lead some consumers to believe they were dealingwith an authorized Toyota affiliate. Imagery, logos and othervisual markers may be particularly significant in cyberspace,where anyone can convincingly recreate the look and feel ofa luxury brand at minimal expense. It’s hard to duplicate aLexus showroom, but it’s easy enough to ape the Lexus site.

[10] But the Tabaris submitted images of an entirelychanged site at the time of trial: The stylized mark and “L”logo were gone, and a disclaimer appeared in their place. Thedisclaimer stated, prominently and in large font, “We are notan authorized Lexus dealer or affiliated in any way withLexus. We are an Independent Auto Broker.” While notrequired, such a disclaimer is relevant to the nominative fairuse analysis. See Welles, 279 F.3d at 803. Toyota claims theTabaris’ disclaimer came too late to protect against confusioncaused by their domain names, as such confusion would occurbefore consumers saw the site or the disclaimer. See Brook-field, 174 F.3d at 1057. But nothing about the Tabaris’domains would give rise to such confusion; the Tabaris didnot run their business at lexus.com, and their domain namesdid not contain words like “authorized” or “official.” See pp.9709-11 supra. Reasonable consumers would arrive at theTabaris’ site agnostic as to what they would find. Once there,they would immediately see the disclaimer and wouldpromptly be disabused of any notion that the Tabaris’ websiteis sponsored by Toyota. Because there was no risk of confu-sion as to sponsorship or endorsement, the Tabaris’ use of theLexus mark was fair.

[11] This makeover of the Tabaris’ site is relevant becauseToyota seeks only forward-looking relief. In Volkswagen-werk, we declined to order an injunction where the defendant


had likewise stopped all infringing activities by the time oftrial, 411 F.2d at 352, although we’ve said that an injunctionmay be proper if there’s a risk that infringing conduct willrecur, Polo Fashions, Inc. v. Dick Bruhn, Inc., 793 F.2d 1132,1135-36 (9th Cir. 1986). Even assuming some form of aninjunction is required to prevent relapse in this case, theproper remedy for infringing use of a mark on a site generallyfalls short of entirely prohibiting use of the site’s domainname, as the district court did here. See Interstellar Starship,304 F.3d at 948. “[O]nly upon proving the rigorous elementsof cyber-squatting . . . have plaintiffs successfully forced thetransfer of an infringing domain name.” Id. Forced relinquish-ment of a domain is no less extraordinary.

[12] The district court is in a better position to assess in thefirst instance the timing and extent of any infringing conduct,as well as the scope of the remedy, if any remedy shouldprove to be required. We therefore vacate the injunction andremand for reconsideration. The important principle to bear inmind on remand is that a trademark injunction should be tai-lored to prevent ongoing violations, not punish past conduct.Speakers do not lose the right to engage in permissible speechsimply because they may have infringed a trademark in thepast.

C. When considering the scope and timing of any infringe-ment on remand, the district court must eschew application ofSleekcraft and analyze the case solely under the rubric ofnominative fair use. Cairns, 292 F.3d at 1151. The districtcourt treated nominative fair use as an affirmative defense tobe established by the Tabaris only after Toyota showed a like-lihood of confusion under Sleekcraft. This was error; nomina-tive fair use “replaces” Sleekcraft as the proper test for likelyconsumer confusion whenever defendant asserts to havereferred to the trademarked good itself. Id. (emphasis omit-ted); see also Welles, 279 F.3d at 801.


On remand, Toyota must bear the burden of establishingthat the Tabaris’ use of the Lexus mark was not nominativefair use. A finding of nominative fair use is a finding that theplaintiff has failed to show a likelihood of confusion as tosponsorship or endorsement. See Welles, 279 F.3d at 801;New Kids, 971 F.2d at 308 (“Because [nominative fair use]does not implicate the source-identification function that isthe purpose of trademark, it does not constitute unfair competi-tion.”).11 And, as the Supreme Court has unambiguouslyinstructed, the Lanham Act always places the “burden ofproving likelihood of confusion . . . on the party charginginfringement.” KP Permanent Make-Up, Inc. v. LastingImpression I, Inc., 543 U.S. 111, 118 (2004); see also id. at120-21. In this case, that party is Toyota. “[A]ll the [Tabaris]need[ ] to do is to leave the factfinder unpersuaded.” Id. at120.

We have previously said the opposite: “[T]he nominativefair use defense shifts to the defendant the burden of provingno likelihood of confusion.” Brother Records, Inc., 318 F.3dat 909 n.5. But that rule is plainly inconsistent with LastingImpression and has been “effectively overruled.” Miller v.Gammie, 335 F.3d 889, 893 (9th Cir. 2003) (en banc); seealso 4 McCarthy on Trademarks and Unfair Competition§ 23:11 at 82 n.5 (4th ed. 2010). A defendant seeking to assertnominative fair use as a defense need only show that it usedthe mark to refer to the trademarked good, as the Tabarisundoubtedly have here. The burden then reverts to the plain-tiff to show a likelihood of confusion.

11This is necessarily so because, unlike classic fair use, nominative fairuse is not specifically provided for by statute. A court may find classic fairuse despite “proof of infringement” because the Lanham Act authorizesthat result. See 15 U.S.C. § 1115(b)(4). Nominative fair use, on the otherhand, represents a finding of no liability under that statute’s basic prohibi-tion of infringing use. See id. § 1114.


Laches

The Tabaris claim Toyota’s case is barred by laches. Thiswould obviate any need to remand, as it would provide a com-plete defense to Toyota’s trademark claims. The district courtrejected this defense, and we review for abuse of discretion.United States v. Marolf, 173 F.3d 1213, 1218 (9th Cir. 1999).

[13] The district court found that Toyota waited six monthsbefore contacting the Tabaris after it became aware of theirdomain names. The Tabaris point to no evidence that wouldjustify overturning that finding on appeal. Nor was it an abuseof discretion to conclude that short delay was reasonable. Anadditional delay of two years ensued before Toyota broughtthis suit, but during that period the parties were actively seek-ing to resolve this matter out of court. It was not unreasonablefor Toyota to attempt to avoid the expense and inconvenienceof a lawsuit. See, e.g., E. & J. Gallo Winery, 967 F.2d at1285, 1294.

[14] Nor did the relatively brief delay prejudice theTabaris. See id. at 1294. The Tabaris note that one witnessanswered “I don’t remember” in her deposition, but they pres-ent no evidence that the witness’s loss of memory occurredduring the period of delay. We must therefore affirm the dis-trict court’s rejection of the Tabaris’ laches defense.

Seventh Amendment

[15] Finally, we consider the Tabaris’ claim that the dis-trict court deprived them of their right to a trial by jury whenit failed to empanel a jury to decide Toyota’s trademarkclaims. Because Toyota only sought an injunction, the districtcourt did not err by resolving its claims in a bench trial. See,e.g., Anti-Monopoly, Inc. v. Gen. Mills Fun Group, 611 F.2d296, 307-08 (9th Cir. 1979). Nor were the Tabaris entitled toa jury trial on their equitable defenses to those claims, DanjaqLLC v. Sony Corp., 263 F.3d 942, 962 (9th Cir. 2001), or their


counterclaims seeking declarations of trademark invalidityand non-infringement, Shubin v. U.S. Dist. Ct. for S.D. Cal.,313 F.2d 250, 251-52 (9th Cir. 1963).

The Tabaris also claim the district court erred by bifurcat-ing the trademark claims from the Tabaris’ counterclaims forintentional and negligent interference with prospective eco-nomic advantage, as to which the Tabaris undoubtedly didhave a right to trial by jury. After resolving the trademarkclaims in a bench trial, the district court granted summaryjudgment against the Tabaris on the interference counter-claims. This was proper only if there were no common factualissues among the bifurcated claims; otherwise, the interfer-ence counterclaims should have been addressed first in orderto avoid the risk that findings made in the bench trial wouldbecome the law of the case and prevent a jury from determin-ing the common issues. See Dollar Sys., Inc. v. Avcar LeasingSys., Inc., 890 F.2d 165, 170 (9th Cir. 1989).

[16] There’s no need for an exhaustive inquiry to deter-mine whether there was factual overlap between the claims;we can take Toyota’s word for it. After the bench trial, Toyotasought summary judgment on the Tabaris’ counterclaims onthe ground that:

Much of the testimony and evidence offered at trialto support or refute Defendants’ affirmative defensesand . . . counterclaims . . . involve the same issuesof proof necessary to Defendants’ pending tortiousinterference counterclaims. For example, the factualallegations underlying Defendants’ affirmativedefense of inequitable conduct, unclean hands andtrademark misuse are also central to Defendants’ tor-tious interference counterclaims.

Toyota claimed there was no longer any need for a jury trialbecause the district court’s bench trial findings constituted the


“law of the case.”12 Of course, this is precisely the result—forfeiture of the right to trial by jury—that the rule articulatedin Dollar Systems strives to prevent. Id. Because Toyota nevershould have been in a position to make such an argument, theprocedure adopted by the district court was error.

[17] Nevertheless, it was harmless, and there’s no need torevisit the issue on remand. See Kulas v. Flores, 255 F.3d780, 784 (9th Cir. 2001). When the district court granted sum-mary judgment on the Tabaris’ counterclaims, it didn’t rely onany factual findings made at the bench trial. It determined thatany reasonable jury would have to hold for Toyota on thecounterclaims: With regard to the Tabaris’ claim of negligentinterference, it held that the Tabaris had failed to provide anyevidence that Toyota owed them a duty of care. See Stolz v.Wong Commc’ns Ltd. P’ship, 31 Cal. Rptr. 2d 229, 238 (Cal.Ct. App. 1994). And, with regard to the intentional interfer-ence claim, it found that Toyota’s act of bringing suit wasabsolutely privileged, Silberg v. Anderson, 786 P.2d 365,370-72 (Cal. 1990), and that the Tabaris had failed to provideany other evidence of intentional interference. The Tabarisdon’t challenge the substance of those holdings on appeal.13

12Toyota artfully maneuvered to obscure this factual overlap before trialand again on appeal. Toyota argued in favor of bifurcation on the groundsthat even “a cursory review” would show “that there are no commonissues of fact between any of these original claims and the counterclaims.”This was technically correct: The overlap was between the Tabaris’defenses and counterclaims, not Toyota’s “original claims” and theTabaris’ counterclaims. Toyota evidently hoped that the district courtwould not notice the careful parsing of its language, and that the Tabaris(who are defending this case pro se) would not call it to the court’s atten-tion.

Toyota is playing the same game on appeal: It states that bifurcationwas proper because “[t]here was no factual overlap between Toyota’strademark claims and Fast Imports’ interference claims.” But Toyota isonly telling half the story by talking about only half of the relevant claims;Toyota admitted as much in its motion for summary judgment. Such selec-tive memory exceeds the bounds of zealous advocacy.

13The Tabaris do challenge the district court’s holding that they failedto present evidence that they were damaged by Toyota’s alleged tortious


Because the district court could have granted summary judg-ment on this basis before the bench trial, it was harmless errorfor it to do so after the trial was concluded. See Kulas, 255F.3d at 784. On remand, the district court therefore need notdisturb its grant of summary judgment on the Tabaris’ inter-ference counterclaims.

* * *

We vacate and remand for proceedings consistent with thisopinion. At the very least, the injunction must be modified toallow some use of the Lexus mark in domain names by theTabaris. Trademarks are part of our common language, andwe all have some right to use them to communicate in truth-ful, non-misleading ways.

Many of the district court’s errors seem to be the result ofunevenly-matched lawyering, as Toyota appears to have takenadvantage of the fact that the Tabaris appeared pro se. See,e.g., p. 9720 n.12 supra. To avoid similar problems onremand, the district court might consider contacting membersof the bar to determine if any would be willing to representthe Tabaris at a reduced rate or on a volunteer basis.

VACATED AND REMANDED.

Costs on appeal are awarded to the Tabaris.

FERNANDEZ, Circuit Judge, concurring:

I concur in the majority’s conclusion that the district courterred in its handling of the nominative fair use defense. I write

conduct. But the district court also found that no reasonable jury couldfind Toyota liable. The Tabaris’ argument that they were damaged is irrel-evant in light of this unchallenged holding regarding liability.


separately, however, because I cannot concur in all that is saidby the majority.

First, and principally, I feel compelled to disassociatemyself from statements by the majority which are not sup-ported by the evidence or by the district court’s findings. Isimply cannot concur in essentially factual statements whoseprovenance is our musings rather than the record and determi-nations by trier of fact. For example, on this record I do notsee the basis for the majority’s assertion that the “relevantconsumer is . . . accustomed to shopping online”;1 or that“[c]onsumers who use the internet for shopping are generallyquite sophisticated”2 so that they are not likely to be misled;or that “the worst that can happen is that some consumersmay arrive at [a] site uncertain as to what they will find”;3 orthat, in fact, consumers are agnostic and, again, not likely tobe misled;4 or that “[r]easonable consumers would arrive atthe Tabaris’ site agnostic as to what they would find.”5

Second, I am unable to join the gratuitous slap at counselfor Toyota in the majority opinion,6 which I see as entirelyunnecessary to our decision or even to the upholding of themarmoreal surface of the law.

Finally, I do not join the final textual paragraph, whichnudges the district court to find pro bono counsel for theTabaris, who have neither chosen to retain their own counselnor demonstrated that they cannot do so. To the extent that themajority sees their activities as especially socially worthy andabove reproach, I do not agree.

Thus, I respectfully concur in the result.

1Majority opinion, page 9706. 2Id. at 9709. 3Id. at 9711. 4Id. at 9711. 5Id. at 9715. 6Id. at 9720 n.12.


TOYOTA MOTOR SALES v. TABARI - Ninth Circuit Court of Appeals

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